How I Left Corporate – Part II

In Part I I talked about what sparked my desire to leave, how I came across my road map and what my backup plan entailed.  In this post we’ll go over some of the intricacies of that plan and how it went from ideation to implementation.

Devising The Plan

No more Brooks Brothers, Brothers Brooks?

No more Brooks Brothers, Brothers Brooks?

The first post mentioned that it was the book by Jeff Cohen that gave me the roadmap on “how” to make my transition. I will not share everything that is in his book Working Less, Earning More, but I will highlight its essence.

Essentially, the key to working less and earning more is to margin up the payout for the time/effort that you put in. For example, if you can make $40 an hour doing part time work 40 hours a week or $500 an hour for doing 4 hours of work per week, which do you choose? You choose the second because you 1) make $2,000 versus $1,600 AND 2) you still have 36 hours in the week to make more money.

So the key to the equation is that your second life has to produce more output (money) for your input (time/effort).  Thus your “new life” can take the form of being a consultant, doing freelance work, running your own business or just living off passive income.  However, once you have identified your new life, you essentially have to “bridge” from your current one to the other. So how do you accomplish this?  Per the book you can do this by:

  1. Switching to part time work
  2. Negotiating a consulting gig (with your current employer)
  3. Working freelance assignments (at night)
  4. Creating passive income (like purchasing rental property)
  5. Cut a deal with your spouse

I already knew that my second life was running my/our own business.  However, at the time I was thinking of all of this, I was well off from the bridge phase.  Thus, my shift actually involved a “pre-bridge” phase.  As I mentioned in the first post, this pretty much involved:

  • Building the business part time
  • Creating a fallback position within corporate

I wanted to do the two things above for a few reasons.  First, I wanted to scale the business up to a point that I could then transition into it with little disruption to my finances.  Second, I wanted a “plan B” should things not work out.  If I had to come back to the corporate world, I wanted it to be at a certain level (e.g. Manager).  Thus, while the business grew, I focused on attaining said fallback position (which I did).  Once that occurred, it was just a matter of waiting for the opportune time to present itself to make my exit.

Getting Prepared 

Leaving the rat race in 3...2...

Leaving the rat race in 3…2…

Preparing to leave until all of the pieces were aligned actually involved a lot. This included:

  • Curtailing finances and my lifestyle so that I could survive the startup phase.
  • Switching to my spouses health care.
  • Agreeing that she would stay on in corporate while I transitioned full time into the business.  It’s important to outline roles going into the transition as it cuts down on friction when it actually begins to happen.
  • Outlining what I would be doing to bridge the two worlds.  I decided to do something similar to consulting, but a little more “guaranteed” so to speak.  I decided to become a contractor and persue engagements via an agency during the time outside of tax season.

Now, if you are thinking of leaving and you don’t have a spouse/partner who can help you bridge, don’t assume that all hope is lost.  This just means that you have to 1) build a longer bridge or 2) build one that is strong.  How?  You can take part time/contract work that gives you flexibility to build your business gradually.  You can work for your employer in a part time consulting position (e.g. 6 months to a year) until you train a replacement or work yourself into your new life.  The possibilities are endless; you just have to think creatively.

The Departure

Catching the last train for the last time

Catching the last train for the last time

In 2011, the IRS, claiming authority under Section 330, issued a new rule making unregistered tax return preparers subject to Circular 230.  Much noise was made about this and it looked like the opportunity I had been waiting on.  Essentially, 60% of the tax preparation market looks to paid preparers to have their taxes done.  Of the paid preparer market, 40% is comprised of Attorneys, CPAs and Enrolled Agents (EAs).  The remaining 60% is made up unregistered preparers who do not hold one of these designations.  By regulating this group of preparers (and subjecting them to testing requirements) it appeared that a large population of preparers might be withdrawing from the market (thus effectively shrinking supply and artificially elevating demand).  Unfortunately, later in 2012, the case of Loving vs. IRS was brought to trial in an attempt to stop the IRS’ actions.

Needless to say, in late 2011 my wife and I made the decision that the timing was right for me to leave.  We quickly put some of the last “planning” pieces in place and I effectively “retired” from corporate america on January 13, 2012.

In the next and final post, I will talk about how I implemented my bridge and where things are now.